A US$350 million deal has been signed to finance an 80 megawatt (MW) peat to power project in Rwanda which aims to increase access to electricity for the three quarters of the country’s population that is currently off the grid.
The group of signatories includes Africa Finance Corporation (AFC), which is arranging total senior debt facilities of US$225 million, contributing US$75 million in loans and providing an underwriting commitment of US$35 million, and Finnfund, the Development Agency of Finland, the lead arranger for the junior debt and which is providing US$ 10 million of the mezzanine debt tranche.
Also contributing to the financing deal are the Eastern and Southern African Trade and Development Bank (PTA Bank), the African Export-Import Bank (Afreximbank), the Development Bank of Rwanda (BRD)and the Export-Import Bank of India. The sponsors of the Project are Hakan Mining and Electricity Generation Company Limited (Hakan), a Turkish power generation company, and Quantum Power Limited (QP), a multi-billion dollar international investment company
The project will utilise Rwanda’s significant peat reserves, estimated at approximately 155 million tons, to improve the country’s installed generation capacity, which currently stands at 186 MW. This will in turn alleviate the need for Rwanda to rely on costly external imports of fuel to power its growth.
Andrew Alli, CEO of AFC, commented on the announcement: “The government has made investment in power infrastructure a priority and AFC intends to do all it can to help Rwanda work towards its goal of achieving 100% electricity access by its people.
“Rwanda is one of Africa’s fastest growing economies. However, only 25% of the population currently has access to reliable electricity. If Rwanda could achieve GDP growth rates of 6.9% in 2015 with such a low proportion of the country connected to the grid, think what could be achieved if access is improved.
“The construction of this peat to power plant is a significant step along the road to achieving that goal.”
Rwanda currently imports expensive diesel and heavy fuel oil, with thermal plants contributing about 40% of its installed capacity. National electricity generation costs of over 20USc/KWh are therefore one of the most expensive in Africa. By substituting peat for diesel in the power generation mix, the proposed project will reduce the country’s average cost of electricity generation by approx. 35-40%, and save millions of dollars annually in fuel import costs.
AFC, an international investment grade multilateral finance institution, was established in 2007 with an equity capital base of US$1 billion, to be the catalyst for private sector infrastructure investment across Africa. With a current balance sheet size of approximately US$3.2 billion, AFC is now the second highest investment grade rated multilateral financial institution in Africa with an A3/P2 (Stable outlook) rating from Moody’s Investors Service. In May 2015, AFC successfully concluded a debut US$750 million Eurobond issue which was 7 times oversubscribed and attracted investors from Asia, Europe and the USA.
AFC’s investment approach combines specialist industry expertise with a focus on financial and technical advisory, project structuring, project development and risk capital to address Africa’s infrastructure development needs and drive sustainable economic growth.
AFC invests in high quality infrastructure assets that provide essential services in the core infrastructure sectors of power, natural resources, heavy industry, transport, and telecommunications.